Dollar Tree Sags Despite Beating Expectations

Dollar Tree (NASDAQ: DLTR) fell early Tuesday despite a top- and bottom-line beat for its latest quarter and better-than-expected comparable store sales. The discount retailer projects full-year earnings in the lower half of its prior guidance range.

Consolidated net sales increased 8.1% to $6.94 billion. Enterprise same-store sales increased 6.5%. Dollar Tree comparable store sales increased 8.6% (8.5% when adjusted for currency fluctuations), driven by a double-digit increase in average ticket, partially offset by a decline in traffic. Family Dollar’s 4.1% same-store sales increase was a combination of an increase in ticket and traffic.

Gross profit increased 17.5% to $2.07 billion. Gross margin improved 240 basis points to 29.9%. This improvement was driven by improved initial mark-on and leverage on occupancy and distribution costs, partially offset by a product mix shift to lower-margin consumable products, inflationary cost pressures, higher shrink and markdowns.

Said CEO Mike Witynski, ““Our third quarter sales performance reflects the timely execution of merchandising initiatives to drive our consumables business in this uncertain and inflationary environment. Same-store sales for both segments improved from the prior quarter and delivered a sequential monthly improvement throughout the quarter. Shoppers are responding to our new value proposition at Family Dollar and Dollar Tree as we focus on driving both traffic and store productivity.”

In the quarter, the Company repurchased 2.86 million shares, at an average price of $139.04, for $397.5 million.

DLTR shares were pummeled $14.34, or 8.7%, to $150.91 soon after Tuesday’s open.